Same Store Sales

Updated on March 19, 2024
Article byWallstreetmojo Team
Edited byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

What Are Same-Store Sales?

Same-store sales or comparable-store sales, or like store sales, is a method adopted by the management to evaluate financial growth by evaluating the change in the turnover of an existing outlet in the current time by comparing it with the last year’s figure generated during the same period.

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The method utilizes the figure for sales of a company’s already existing store or unit or outlet for the same period in two different fiscal years. The calculation helps assess how well a company grows by comparing the sales figures of the previous year and the current year from particular stores.

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Key Takeaways

  • The same-store sales, comparable-store sales, or like-store sales measure financial growth by evaluating the current turnover of an existing outlet compared to last year.
  • Retail chains use sales metrics to analyze performance and identify trends. Same Store Sale is helpful for pinpointing causes of declining sales and forecasting store performance.
  • The same store sale method compares sales figures for a store in different fiscal years to identify performance strengths and weaknesses, allowing management to focus resources effectively.

Same Store Sales Explained

Same store sales method is a metric commonly used to evaluate the performance of already existing outlets by comparing the turnover generated in the current period to the turnover generated during the same period in the previous year, making the comparison fundamental and easy to understand.

The evaluation helps the company keep track of the unit having better performance and the unit with the weaker performance and thus plays a crucial role in the decision-making procedure for the management to focus on the more vulnerable areas and thus maintain the overall functionality and performance of the company.

Generally, the companies experience relatively positive growth in the total turnover generated by the company compared to last year’s figures. It happens typically because companies tend to increase their number of outlets and stores, which increases the company’s turnover. Still, such a figure does not show the company’s performance as it does not provide enough data for calculating the performance of already existing outlets.

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Formula

The formula is given below.

Same-Store Sales Formula

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Where,

  • Total Sales (in the current year) = Sales recorded in the period taken for the current year for the particular outlet;
  • Total Sales (in the previous year) = Sales recorded in the same period but the previous year for the same outlet and;
  • The percentage change in sales shows the increase or decrease in the total sales recorded by the outlet in the current.
  • Year compared to the total sales recorded in the previous year.

Example

For understanding the concept better, let’s take an example;

You can download this Same Store Sales Excel Template here – Same Store Sales Excel Template

For example, ABC Inc. is a manufacturing company with ten outlets throughout the state. The management wants to evaluate the performance of its two oldest outlets, ‘P’ & ‘Q,’ by evaluating the sales booked in February & March.

Following are the sales figures available for the outlets. Let us check the same store sales calculation and evaluate the performance of the outlets through the Same Store Sale method:

Example

Solution

Let’s evaluate the performance of Outlet – P & Outlet – Q by using this method for both periods’ February’ & ‘March’ –

Performance of Outlet – P for the month of ‘February’ –

Same-Store Sales Example 1

Percentage changePercentage ChangePercentage Change can be defined as a % change in value due to changes in the old number and new number and the values can either increase or decrease and so the change can be a positive value (+) or a negative value (-). read more in Sales = ((20000 /18000) – 1) * 100 = 11.11 %

Performance of Outlet – Q for the month of ‘February’ –

Example 1.2

Percentage change in Sales =((22500 / 17500) – 1)*100= 28.57 %

Similarly, performance for March could be evaluated; and the result would be;

Performance of Outlet – P for the month of ‘March’ –

Same-Store Sales Example 1.3

Percentage change in Sales = ((17000/21000)-1)*100 = -19.05

Percentage change in Sales = – 19.05 % (negative since the sale volume decreased)

Performance of Outlet – Q for the month of ‘March’ –

Example 1.4

Percentage change in Sales =((17500/20000)-1)*100 = – 12.50 % (negative since the sale volume decreased)

Interpretation

This method utilizes the equivalent figures that are comparable to evaluate the percentage of change and the performance of a part, a store, or an outlet of an organization. In the above example, we can evaluate that the figures of the same outlet have been compared with the figures of the same period in both the fiscal yearsFiscal YearsFiscal Year (FY) is referred to as a period lasting for twelve months and is used for budgeting, account keeping and all the other financial reporting for industries. Some of the most commonly used Fiscal Years by businesses all over the world are: 1st January to 31st December, 1st April to 31st March, 1st July to 30th June and 1st October to 30th Septemberread more, which makes it more favorable an equivalent comparison. In case of comparison of figures for outlet P & Q for February, there is an 11.11% & 28.57 % increase in total sales of both the outlets respectively in the year 2020, whereas, in March, there is a decrease in total sales by 19.05% in case of Outlet P & 12.50% in case of Outlet Q. So this helps the organization to keep track of its total performance regarding sales and identify its strong point and weak areas at the same time.

Chart

Same-Store Sale Chart could also be formulated for the above example:

Same-Store Sales Chart

It shows the percentage change in sales figures for the period the same is calculated. It helps to evaluate the fluctuation frequency and derive the stability in the business of the concerned unit or outlet.

Importance

The same sale store is an essential concept for retail chain stores and it has various advantages. To understand the same store sales definition, it is important to understand their significance:

  • By using the same sales store concept or metric, management can analyze the store’s performance. Using this metric, management can analyze a store’s growth and whether the store’s sales have increased compared to the last period.
  • The management can identify the reason for the declined sales of a store. By using this metric, management would be able to decide to open a new store in a new location.
  • Same Sale Store helps management, investor, and market analyst analyze the future performance of a store and whether product demand is increasing in the market.
  • The same sale store metric is useful for management in making decisions regarding continuing existing retail stores and opening new retail stores.
  • This concept gives a clear picture of the growth of a retail chain, whether the store is performing and growing or a few corrective actions are required for maintaining growth. If a store is not performing well, management can decide to shut down that particular store.
  • Investors prefer to see significant growth in a firm or company, this metric gives that comparison, and investors can analyze whether a retail chain is a growing firm or not.

Frequently Asked Questions (FAQs)

Why might companies focus on same-store sales rather than total sales?

To accurately compare sales growth year over year, companies may prefer to focus on same-store sales rather than total sales. It allows for an apples-to-apples comparison and keeps the basis consistent.

What is the same-store sales analysis?

A company with a positive same-store sales figure means they have made more sales per store than the previous year, which shows increased customer demand. However, a negative same-store sales figure indicates that the company has made fewer sales per store, which suggests a decline in customer demand.

What are the components of same-store sales growth?

The two main factors that drive the growth of same-store sales are the price of the products sold and the total number of transactions.
 


What factors can impact same-store sales? 

Several factors can impact same-store sales, including changes in consumer behavior, shifts in economic conditions, pricing strategies, product assortment, marketing effectiveness, and competition. Weather, holidays, and industry trends influence same-store sales performance.

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